by Hamilton E. Davis
In my last post, I sketched a brief sonnet on the theory and practice of Accountable Care Organizations (ACOs), which are a minor but still important offshoot of the federal Obamacare law that deals with health care reform. As it happens, Vermont has a single, state-wide ACO called OneCare Vermont. It is one of about 850 ACOs nationwide; and OneCare is unique in that its operations are under the direct control of our state regulator, the Green Mountain Care Board.
That makes it an unusually complex factor in the state’s healthcare reform space. As I noted in my last post, an ACO’s essential function is to galvanize the shift of reimbursement to doctors and hospitals from fee-for-service, which incentivizes overuse and poor quality, to capitation, block financing for large cohorts of patients for a fixed price. Capitation holds out the prospect of saving as much as a third of the cost of complex, hospital-based care. In Vermont that could run to $300 to $500 million per year, or more.
What is happening on the ground, however, is nowhere near the ACO’s potential. OneCare has built a solid piece of capitation machinery that has enabled some minor savings on Medicaid spending, but the big money in the hospital biz comes from federal Medicare and the private insurance market, which means mostly Vermont Blue Cross. And those payers will not permit capitation to function. That failure is critically important in Vermont because the delivery of health care is the state’s most important industry. In terms of its gross state product, Vermont is one of the poorest states in the country.
The engine of its economy is Chittenden County and its exurbs in northwest Vermont. UVM’s Medical Center Hospital generates around $1.8 billion a year, and the faculty of the UVM College of Medicine brings in some $250 million in research grants annually. Moreover, the availability of national class medicine is essential to attracting and keeping high-quality employers—take away national class healthcare and an international airport and business people would start turning out the lights and closing the doors.
OneCare itself is marginal to the course of health care reform, and the operation of the hospital industry in Vermont. The Board could use OneCare to begin rationalizing profligate spending in the 11 non-UVM hospitals, but its members are treating that issue like a live bomb. At a minimum, they could begin to ratchet back the low-quality surgery that has been flagged by their consultants, but they won’t touch that either.
The OneCare issue, therefore, functions now as a canary in the mine, as a marker of how well or badly the Green Mountain Care Board is performing on its twin responsibilities, regulating costs and reorganizing the hospital system so that it will be sustainable over the remaining early decades of the 21st century. So far, it doesn’t look that good.
Let’s go to the evidence.
Unlike the hospital system, ACOs like OneCare operate on a calendar year. That means the Green Mountain Care Board grapples with the OneCare budget in the late fall, after their main-force effort on all the hospital budgets is complete in mid-September. The latest iteration of the Board, which was formed last year, absolutely trashed OneCare in its 2022 proceedings. In the process, the members got all the important facts wrong. The single most troubling aspect of the entire reform project is the strong likelihood that they did so deliberately. Owen Foster, the then-new chairman of the Board, said that OneCare was responsible for how the hundreds of millions of dollars were spent by hospitals to deliver care to patients, and they had obviously failed to accomplish their mission.
Foster and member Thom Walsh (sic) dripped scorn over what they described as OneCare’s failure to turn the cost needle. Foster asked then-OneCare CEO Vicki Loner whether she might do something worthwhile if she got paid more.
That whole construct was patently false. OneCare Vermont doesn’t deliver so much as an aspirin or a band-aid. It is a pure middleman: each payer, whether it is Medicaid, Medicare or an insurance company negotiates with doctors and hospitals to determine the per capita payment they should pay that provider, based on the amount of care each has delivered in the past. Based on that agreement, the payers send monthly allotments to OneCare and the ACO aggregates the money and disperses the totals to each provider unit.
The amount of money each hospital gets from delivering care, and the quality of that care, is entirely, 100 percent, totally, did I say 100 percent, up to the provider and payer. OneCare has roughly 50 employees, and not one of them, nor all of them together, have the faintest idea of how to determine the ideal amount of care in each episode. And while the reform players talk about it all the time, none of them has the capacity to measure the actual quality of the care.
There is a huge pile of details surrounding the above analysis, but that is the essence. Moreover, whatever anyone’s analysis shows, it really doesn’t matter because any hospital that becomes unhappy about its treatment by the regulators can simply withdraw from OneCare and send their bills to the payers in the way doctors and hospitals have done for the last 100 years, and the way virtually all of them outside Vermont do so today.
So much for the current Green Mountain Care Board’s management of the ACO over the last year.
On Wednesday, Nov. 8, the Green Mountain Care Board, having devoted the last year to excoriating OneCare Vermont for failing to control hospital costs, flipped over completely and praised the ACO for doing a terrific job. No, really, it’s true. The very same Green Mountain Care Board that abused the former CEO Vicki Loner and drove her to take another (better) job, buried her successor, Abe Berman, in flowers. Foster, particularly, and member Thom Walsh were perfectly effusive. They said they were delighted and gratified that OneCare was out there working so hard and effectively to solve the hospital cost problem.
Every one of the adepts I talked to after the session was simply flabbergasted. I know I was. Where did that come from? What changed on the ground that would turn the Board 180 degrees, up versus down, black v. white? I didn’t and still don’t have a clue.
What was even more curious to me was that it just isn’t true. OneCare Vermont hasn’t actually saved Vermonters a dime. The savings have been there, but they have been achieved by the University of Vermont Health Network, and its reorganization of a full 60 percent of all the care delivered in the state.
Two of the 11 non-UVM Network facilities in Vermont had solid financial performances, but both were outliers in that regard. Mt. Ascutney in Windsor operates essentially as a rehab hospital for nearby Dartmouth-Hitchcock Medical Center, whose performance as an academic medical center is similar to UVM’s Medical Center in Burlington; and Copley Hospital in Morrisville, which is something of a black swan, owing to its regional class orthopedic services. Neither had spending profiles that matched the UVM system, but they were pretty close.
The other eight non-UVMers had far more profligate spending patterns. Hospitals in Bennington, Rutland, Brattleboro, St. Johnsbury, St. Albans, Newport, and Randolph are all members of OneCare, but neither their financial performance nor their clinical quality results are anywhere near the UVM system. I haven’t mentioned Grace Cottage Hospital in Townshend, which is so small it doesn’t matter.
Yet another puzzling theme in the Nov. 8 hearing was the discordant note struck by Abe Berman in a letter to the Board on June 26 of this year. A couple of months earlier, OneCare had named Berman its interim CEO. At the time, OneCare had announced that it would challenge the Board’s order that the ACO trim back the salary of its CEO. If the Board insisted on its point, the issue would be adjudicated by the Vermont Supreme Court. It would be the first such challenge in the 10-year history of the reform project.
The June letter, however, broke new ground on the whole reform structure. Berman opened by saying decisions on salaries went beyond the Board’s legal authority. But then he continued:
Nor do we believe that it is properly within the Board’s statutorily-defined purview to cap individual expenses by an ACO as part of the budget-setting process, particularly when those expenditures implicate strategic decisions reserved exclusively to an ACO’s governing body.
We understand…the GMBC staff is currently preparing an analysis of the legality and wisdom of the Board setting budget guidance that purports to set limits on individual ACO spending decisions, the details of which will appropriately not be within a regulator’s knowledge or expertise.
These two sentences constitute a cruise missile aimed at the Green Mountain Care Board, its staff, and its entire posture. Which proved to be entirely clear to the Board members. So, while they were slathering praise on Abe they also kept sliding in questions about whether he still believes what he wrote.
He never clearly said. I am now getting a transcript of the actual dialogue, but if I understood him he was saying that what he wrote was “in the past” and “part of the process.” If there was a balloon over his head, however, Abe was obviously thinking, can we please, please, please go back to saying how great I am and forget that damn letter…
In a day of adjectives, it was sad, pathetic, amusing, ironic. But, it was, importantly, a clear picture of just what a hash the regulatory system is making of our hospital system, which is the single most vital medical, cultural, financial, and economic institution Vermont has.
The actual responsibility for controlling costs in Vermont lies with the Green Mountain Care Board, which has all the power that exists in the system. OneCare has set up a structure that can handle capitated reimbursement perfectly well, but it depends entirely on the payers whether they want to use it. And in Vermont, except for Medicaid, they don’t.
That dismal recitation is just one more element in a complex mosaic that will lead to the final post in this series—whether there is a path forward for Vermont’s health care reform.
Coming up first: a couple more milestones along the way.